Yesterday the New York Times published an article about how gay and lesbian couples are engaging in “adult adoption,” in effect adopting each other, in order to secure inheritance rights to family trusts.
In “Adult Adoption a High Stakes Means to an Inheritance” writer Deborah L. Jacobs writes that while it is not necessary to use this strategy to transfer your own assets, which can be left to anyone you choose, it can be useful for certain trust beneficiaries.
For example, often when I draft a Trust, the Settlor will provide that upon his death, the property will go in Trust to his child, X, for life. X is entitled to all of the income from the trust, plus principal for X’s health, support, education, and maintenance. Upon X’s death, the trust monies will go to X’s children, either in further trust, or outright. Sometimes, depending on the wishes of the Settlor and what type of tax planning we are trying to accomplish, X will have a power to appoint the property upon X’s death to someone else. Sometimes the power will be limited to X’s children or the Settlor’s descendants, and sometimes the power will be more broad.
If cases in which the property will automatically go to X’s children, or when X is limited in his power to appoint the property, an adult adoption may allow X to direct the property to X’s partner. Of course, as the article points out, this strategy is fraught with danger.
An adult adoption clearly is an attempt to frustrate the intention of the Settlor, who wished for the property to go to further generations. If X has a sibling, Y, who is married, Y can not leave the property to Y’s spouse, which is in effect what X is trying to do.
As the article points out, “The lessons here? Family opposition to an adult adoption should never be underestimated. And family members should be informed about your intentions; don’t surprise them.”